JUICE: Cazalet Pitches Plan to Grow Energy Storage

17 Jan 2018

Energy storage technologies are considered by lawmakers, regulators, and many others as a key way to balance the ebb and flow of higher levels of intermittent solar and wind power feeding California’s grid. However, the growth of various storage technologies, which can store excess renewable flows and release the juice at times of high demand, has sputtered in spite of state mandates and incentives. That is largely because of inadequate compensation.

The California Public Utilities Commission is struggling to develop rules, as well as rates, that fairly compensate storage technologies, be they batteries, compressed air, pumped hydro or ice storage technologies connected to distribution or transmission lines.

Ed Cazalet, chief executive officer and president of TeMix Inc, who’s worked in California energy industry for 40 years, advocates a different strategy to advance energy storage and load management in association with solar and wind in California.

Current’s Elizabeth McCarthy interviewed Cazalet, former California Independent System Operator board member and founder and former CEO of Automated Power Exchange, to flesh out the details of a pro storage tariff he advocates. It aims to avoid current price disparities caused by fixed and demand charges that cover the costs of some energy resources, including fossil generation, versus others covered by often inequitable variable charges, including for storage.  

“The poor [wholesale and retail] tariffs affect all resources and loads and not just storage,” Cazalet said.

Cazalet blames the fact that CPUC-subsidized energy storage projects were found to drive up greenhouse gases and peak demand on flawed rates. He also said that the price of greenhouse gases needs to be three to five times higher than the recent carbon cap-and-trade auction prices to drive down emissions to meet California greenhouse gas protection goals.

He calls the CPUC’s proposal to compensate energy storage for various services “extremely complex,” and sure to result in an unhappy outcome. For example, energy regulators as part of their ongoing energy storage reform effort, last week passed additional rules in an attempt to define the various services storage technologies provide to allow for various levels of compensation.

Cazalet recommends getting away from paying for a variety of storage services, be it for reducing peak power or greenhouse gases. “If the wholesale and retail tariffs are correctly designed then there would not be a multiple services use problem.”

Cazalet, instead, insists on using forward and spot prices to spur more storage. Properly determined forward and spot prices for energy ensure “compensation for energy production and use by all resources including storage will be efficient.”

At the same time, he proposes offering customers protection with fixed energy bills for a fixed amount of electricity to avoid hugely volatile bills from the yo-yo spot market prices.

“Customers will be able to stabilize bills with subscriptions for fixed quantities of energy shaped to their typical usage patterns at fixed monthly payments,” Cazalet said. It also would provide stable revenue to utilities and other electricity suppliers.

Predictable payments also would provide steady revenue to storage technologies while assuring efficient charging and discharging and lower greenhouse gases using highly variable real-time spot prices.

His so-called customer “subscription” would incorporate variable time-of-day, week and seasonal retail pricing that depends on actual real-time wholesale and distribution grid conditions including responding to the “duck curve” representing the rapid changes in net load on the grid.

The proposal is not similar to the deregulation scheme in the last century because this proposal retains and improves forward contracting while feeding spot prices all the way to customers.

Under Cazalet’s proposal, real-time prices will soar or tumble when there is excess solar power feeding the grid or high demand because of peak air conditioning demand.

The highly variable real-time prices, however, would only be applied to increases and decreases in usage in each interval, such as hourly or 5 minutes to ensure efficient operations.

This rate design would advance energy storage in California by providing operational and investment signals that enable storage to compete and be paid for its full value.

Real time pricing and subscriptions would be developed by models including interfaces to the California Independent System Operator markets. The ensuing implemented tariff reflecting those prices would be overseen by the California Public Utilities Commission.

The involvement of customers would be minimal because their energy use in response to prices would be largely automated. A customer thermostat, for example could be programed to reduce cooling when prices are high and pre-cool when prices are low in accordance with temperature responses set by the customer. The temperature would not be controlled by a utility program.

But, customers would have to invest in so-called smart energy devices, be they two-way communicating thermostats or other remotely controlled appliances and storage. To date, many ratepayers have resisted investing in these devices because of the costs. Voice control via Alexa or Google, however, is making this easier for customers and also driving costs down.

Cazalet’s pricing plan is being tested out in a pilot program with Southern California Edison funded by the California Energy Commission.

Energy storage will be hampered until a dynamic rate structure is in place that reflects dynamic prices and subscriptions, Cazalet emphasized. “Until the tariffs are fixed, the economics of storage may be challenging except for the requirements of any storage mandates,” he said.

–Elizabeth McCarthy

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